Episode 4: Taxes

SHOW NOTES

Taxes. Nobody likes em but you have to pay them. If you don’t, you could pay a fine, have your property seized, or end up in jail.

The government takes a cut out of your paycheck to gradually pay your tax bill. Otherwise, there would be very few people responsible enough to set money aside to pay their share at the end of the year.

Interested in tax history? This website is dope. The 16th amendment introduced the progressive income tax in 1913, World War 1 solidified it. There had been a brief flat tax and terrifies on imports in the 19th century. You can see what a 1040 form looked like in 1913. It’s pretty close to the one we use in 2017.

Credits and Filing

A tax credit is a dollar for dollar reduction in a tax bill. Which is awesome. That’s different from a deduction, which simply reduces the amount of income your tax bill is calculated from. Here’s some additional reading.

In the US we don’t have a flat income tax. It’s graduated, which is also known as progressive or marginal tax. It’s a little confusing, so just listen to the episode. There’s also something called the effective tax rate, which is closer to the rate you actually pay. Linking to this AGAIN, because it’s really really helpful.

This is just federal tax, you also have to pay state taxes, and often city taxes. There are states that don’t have income tax, which is nice.

Kickstarter Questions

Haven’t paid your tax bill in a few years? Yeeeesh. But don’t worry, it’s not the end of the world!

The gift tax is super confusing. You can give away $14,000 (that’s the amount for 2017) to as many individuals as you like in one year without filing anything. If you give over $14,000 you have to file a gift tax return (form 709), which chips away at the 5.4-ish million dollars a single person is allowed to give away in a lifetime before paying a gift tax. The gift tax is basically for really rich people. Read this for more info.

Non Money Minute

Micronations! Sealand is a small platform in the middle of he North Sea. It was home to one family but basically operates as a nation state. Check out one of my favorite podcasts of all time, 99% Invisible, for more. You can buy a Sealand passport and even buy your way into the royal family.